Today hearings are going on in Washington to decide how to clean up the financial mess that has been building over the last decade or more. They are trying to figure out how to bail out big businesses so they don’t fail and cause more of a mess for us all. What are they really doing for us? Can they help the small business owner? Are they even considering the small business owner?
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The reality is the financial markets are in disarray because mortgages were made available to high risk borrowers using programs they couldn’t afford. Then as interest rates rose the payments got too high and the high risk borrower couldn’t afford the payments any longer.
Lenders are now looking at all lending practices. In the small business lending market, there used to be very easy to obtain loans and lines of credit for a small business owner up to $50,000 with very little documentation. Well, now that the financial crisis has hit the easy programs are falling to the waste-side.
Keep in mind when you are applying for a small business loan, more now than ever, an approval is based on the level of risk of the borrower. If you are a high risk business or business owner you aren’t going to get an approval. If you lower your risk by being in compliance with the lending markets, having a business credit profile, a solid business credit score, good trade references, revenue in the business and a good personal credit score you improve your chances of an approval.
If you don’t have all of those things to lower your risk, don’t wait. Start now to improve your standing as a low risk borrower so as the credit markets loosen, and they will in due time, you are ready to take advantage of the programs that will be made available.
So what do you do now? There are several lending options for the small business owner. The best option is one that doesn’t cost money with high interest rates, trade credit. Trade credit, also known as business or corporate credit is easier to obtain once a business is in compliance with the lending markets. It is when one business sells a product or service to another business on credit terms. Typically without interest if paid within 30,60 or 90 days.
In addition there are several other alternative financing options that will be easier to obtain once a business is in compliance and obtained several trade accounts with vendors. Those options include equipment leasing, merchant account cash advance program, equipment sale-lease back, factoring, purchase order financing, angel investors, etc., etc.
The place to start when seeking financing is to put your company in compliance with the lending markets. The first step in that process is to incorporate and then do everything you need to in order to lower the risk level of the business. Get a business license, list your phone number with directory assistance and about 2,000 other checks that a lender can do to determine your level of risk. The BCS Compliance report will do those checks for you.
In today’s financial crisis we need not sit back and wait for the government to save us. We as business owners are the ones that built this country, not the law makers. We need to start right now, doing everything we can to build revenues, add jobs and provide a quality service or product that’s needed in today’s market place. When we do that, good things will happen.